The Arm’s Length Standard (ALS) governs the allocation of taxing rights in international transactions between controlled parties and is a fundamental concept of international tax law. Despite its hegemony, the standard is subject to criticism and several alternative proposals have emerged.
This Chapter aims to provide a critical overview of the ALS as a legal concept of Transfer Pricing (TP). For achieving that purpose, this Chapter is divided in two sections. The first section addresses the justification and the content of the ALS, providing a brief explanation of the existing TP methods. The second section addresses the flaws of the standard and the current alternative proposals.